1987 (8) TMI 397 - SC - VAT and Sales Tax

Supreme Court affirms state jurisdiction on Central sales tax for inter-State coal sales

State of Uttar Pradesh and Others Versus Kasturi Lal Har Lal

The Supreme Court upheld the High Court's decision, ruling that the Sales Tax Officer in U.P. lacked jurisdiction to impose the Central sales tax on ... Whether the respondent herein M/s. Kasturi Lal Har Lal is liable to the State of Uttar Pradesh for payment of the Central sales tax in respect of the transactions of sale of coal? Held that:- Appeal dismissed. In this case, the subsequent sale if there be any in U.P. did not occasion the movement of the goods. It is therefore, not subject to inter-State sales tax. In that view of the matter we are of the opinion that the Sales Tax Officer in U.P. was not the appropriate authority either to impose or collect the duty on inter-State sale. The High Court was right in the view it took Issues Involved:1. Liability of the respondent for payment of Central sales tax.2. Jurisdiction of the Sales Tax Officer, Lucknow, to impose the tax.3. Definition and implications of 'appropriate authority' under the Central Sales Tax Act, 1956.4. Interpretation of inter-State sales and the movement of goods.5. Registration status of the dealer and its impact on tax liability.Detailed Analysis:1. Liability of the Respondent for Payment of Central Sales Tax:The core issue was whether M/s. Kasturi Lal Har Lal was liable for the Central sales tax for coal sales during the period from October 1, 1965, to March 31, 1966. The Sales Tax Officer imposed a tax liability amounting to Rs. 18,170.98 on sales worth Rs. 9,08,548.81. The Sales Tax Officer determined that the transactions constituted inter-State sales under section 3(b) of the Central Sales Tax Act, 1956, as the dealer endorsed the railway receipts (R. Rs.) to parties in Uttar Pradesh (U.P.) while the goods were in transit from Bihar to U.P.2. Jurisdiction of the Sales Tax Officer, Lucknow, to Impose the Tax:The High Court ruled that the Sales Tax Officer in Lucknow lacked jurisdiction to impose the tax. According to section 9(1) of the Central Sales Tax Act, the 'appropriate authority' to levy and collect the tax is the state from which the movement of goods commenced, which in this case was Bihar. The High Court set aside the assessment order on this basis.3. Definition and Implications of 'Appropriate Authority' under the Central Sales Tax Act, 1956:The Act stipulates that the 'appropriate State' for tax purposes is the state where the dealer's place of business is located. For dealers with businesses in multiple states, each state where the business operates is considered the 'appropriate State.' The High Court emphasized that the jurisdiction to levy and collect tax is conferred on the state where the movement of goods begins. Therefore, the Sales Tax Officer in Bihar, not U.P., was the appropriate authority.4. Interpretation of Inter-State Sales and the Movement of Goods:The court examined whether the sales transactions constituted inter-State sales. The movement of goods from Bihar to U.P. and the endorsement of railway receipts during transit indicated that these transactions were inter-State sales under section 3(b) of the Act. The transfer of title occurred through the endorsement of railway receipts, thereby occasioning the movement of goods across state boundaries.5. Registration Status of the Dealer and Its Impact on Tax Liability:The respondent argued that both the dealer and the purchasing parties were unregistered, negating the imposition of sales tax. The court noted that under section 6(1A) of the Act, tax liability exists irrespective of registration status. However, the proviso to section 9(1) applies only to registered dealers. The High Court held that the Sales Tax Officer in U.P. could not impose or collect the tax due to the dealer's unregistered status and the jurisdictional provisions of section 9(1).Conclusion:The Supreme Court upheld the High Court's decision, confirming that the Sales Tax Officer in U.P. was not the appropriate authority to levy or collect the tax on inter-State sales. The appeal was dismissed with costs. The judgment clarified the jurisdictional boundaries and the importance of the state from which the movement of goods commences in determining tax liability under the Central Sales Tax Act, 1956.